Protesters Took To The Streets Of Hong Kong Fighting Against A Highly Unpopular Bill That Would Allow People Arrested In Hong Kong To Be Extradited Back To Mainland China; Elon Musk Talks Up The Tesla Shares; Deep Trouble Over Deep Fakes, Mark Zuckerberg Himself Has Been Targeted. Aired: 9-10a ET

Aired June 12, 2019 - 09:00 ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

ANNOUNCER: This is CNN Breaking News.

JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, FIRST MOVE: Welcome to FIRST MOVE. We're kicking off today's show with breaking news out of Hong Kong

where protesters took to the streets fighting against a highly unpopular bill that would allow people arrested in Hong Kong to be extradited back to

mainland China.

Tens of thousands of protesters marched against that proposed law, bringing Hong Kong's financial districts to a standstill and forcing the legislature

there to postpone a planned debate on that bill.

Police, as you can see there, in pictures that were taken earlier, used tear gas, rubber bullets, water cannons and pepper spray to quell the

demonstrations. The first time in fact that rubber bullets have been used Hong Kong in decades. Police called today's protests, quote, "a riot

situation." It's no surprise, of course, as you can see, judging by those pictures that it did see and triggered some selling pressure in regional

stock markets."

Let me give you a look of what we saw over in the Asia session. Hong Kong's Hang Seng Index falling some 1.7 percent amid fears that investor

confidence could be dented and that businesses based or operating there could perhaps relocate in the future if they're worried about this -- the

law passing and what it means afterwards, barring costs spike, and the Hong Kong dollar rose to its highest level of the year.

What about here in the United States? Well, stocks -- except for a lower open after closing slightly lower on Tuesday, the Dow breaking a six-day

winning streak. We've also had U.S. inflation numbers released this morning, they were in line with estimates still and the year-on-year basis

below the Feds' target. Plenty more discussion on that later on in the show.

But for now I want to get straight over to Hong Kong for the latest there. Pro-democracy lawmakers lashed out at Hong Kong's Chief Executive during a

press conference a short while ago accusing Carrie Lam of selling out Hong Kong and treating its people like the enemy.

Matt Rivers joins us from near the Legislative Council Building where the debate was supposed to take place. Matt, great to have you with us. And

of course, we can still see crowds of people behind you actually, in those pictures, just describe what we saw over the past few hours and what's

going on right now.

MATT RIVERS, CNN INTERNATIONAL CORRESPONDENT: Yes, well, Julia, this has been a day that started out with peaceful protests, those protests then

turned pretty violent. And now things have kind of calmed down again. The question is what happens as we go through the overnight hours?

It was this morning here in Hong Kong that legislators were set to take up the second reading, another round of debate on that extradition bill that

you were just talking about. But tens of thousands of protesters showed up as we expected, and legislators actually postponed that debate.

What happened around 3:30 to 4:00 in the afternoon here in Hong Kong, though is that things did turn violent. Protesters were throwing things

that police. Police started deploying tear gas canisters, they started using rubber bullets, and things escalated quite quickly. And that's where

we are right now.

So basically right down the road here behind me, there are thousands of people here. This is the heart of Hong Kong's financial district. This is

where embassies are. This is where major businesses are located and this road has been completely shut off by protesters.

Now, if we bring it back here, you can see that the cops right now actually just took a dinner break. They're pretty relaxed right now. And I think

the best way I would describe this is perhaps the eye of the storm, the calm before the storm, maybe because all of those people, thousands of

people that have been erecting barricades, makeshift barricades in the street with anything that they can find over the last maybe two hours or

so, you would imagine that the police are not going to let them stay there forever.

So for now, they are; maybe they're trying to wait them out, see if they'll disperse on their own. That's probably not going to happen. And so then

the question becomes, well, what happens next? When will police try and disperse them? How will they try and disperse them? And does that get

more violent? These are questions we don't know. But we might find out in the hours -- the answers, we will find out in the hours to come -- Julia.

CHATTERLEY: Matt, have you managed to speak to any of the security forces there? Are they giving you any indication of just how long they're willing

to allow people to remain there? And are you also seeing more people joining, because I assume in the past couple of hours people have left the

office, they've left work. And if they want to join these protests then they're doing so.

RIVERS: Yes, there's a couple -- there's two main protest sections, kind of both of them are in very important parts of central Hong Kong here. In

terms of the numbers growing. I don't think we're seeing that. I think the people that are there right now, they're pretty much there to stay. I

don't know how many will disperse over the next couple hours.

They don't seem to be growing. They don't seem to be joined by let's say your average white collar workers in his or her 40 or 50. These are

The tear gas that we saw on this very boulevard not long ago, has subsided for now. And now you actually have riot police, so just a short distance

away who are -- it's been a long day of back and forth here and of kind of engaging and in some times, some occasions violently engaging with the

demonstrators.

But as you can see, the tensions for the moment have calmed down just a little bit. But the standoff is still here. And that fundamental question

of what the city authorities are going to do, what the demonstrators are going to do is still up very much in the air.

They have shown that they are very much opposed to this controversial extradition law that the leader of the city government has stood behind.

She has defended it saying, "Hey, it closes legal loopholes for criminals for fugitives." Whereas the demonstrators here fear it could expose them

to the very opaque, sometimes very capricious judicial system not far away in mainland China.

And the local authorities essentially disregarded this massive protest, the likes of which I've never seen in this city on Sunday, where according to

some estimates, one in seven people from this city's population were out in the streets peacefully opposing the extradition law. Well, look what's

happened just a few days later. Tear gas, barricades, and in the short term, the demonstrators have succeeded in forcing lawmakers to postpone

today's planned debate on this very controversial law.

[09:35:21] WATSON: This has been a mass show of distrust for the city government, and by extension, the central government in mainland China.

CHATTERLEY: Ivan, we just heard some comments that from Carrie Lam, of course, the Chief Executive saying, look, we're standing firm, and we're

going to push this through. What are the protesters saying to you? You called it a standoff earlier, are they saying to you that they're going to

continue to come out and protest so long as this bill remains an option here and an option for the law to be passed here? I just -- I struggle to

see how this ends at this stage.

WATSON: None of us really know, and the scenes are very reminiscent of the standoff, the Occupy Movement that we saw in these same streets nearly five

years ago during the so-called Umbrella Movement, and that lasted for nearly 80 days, until it petered out.

We don't know what will happen this time around. Some of the protesters are people who were children five years ago and have told me they were too

young to come out and protest five years ago. Others are veterans of that previous period. There is no one leader of this opposition movement. We

saw a rather unprecedented coalition of opposition in Sunday's peaceful protest, religious groups, business interests, labor unions and students.

Today has mostly been younger people. But we've also seen some protesters come after they finished their day's work and joined into this protest

movement. But where will it go? Many of the demonstrators we've talked to have said that they realize that in the end of the day, they probably will

not win. After all, this is a city of seven million people facing off against the might of Communist China, the world's second biggest economy,

and a government that abuses human rights at a level on the other side of the internal border that Hong Kong has never really seen before.

CHATTERLEY: Ivan Watson in Hong Kong. Thank you so much for joining us on that. All right, joining me now Krishna Memani. He is the CIO of OFI at

Invesco. Great to have you with us, Krishna.

KRISHNA MEMANI, OFI CIO, INVESCO: Pleasure.

CHATTERLEY: I want to talk to you about this because we've been debating on the show the importance of Hong Kong as a conduit for financial flows in

China. When you see this kind of behavior in a metropolis like Hong Kong, it makes investors nervous.

MEMANI: Oh, of course. This is very disconcerting, for sure. You know, our hope is that there's patience and and a little bit of understanding on

both sides. And this doesn't escalate to a much higher level. Having said that, I think, it's also worthwhile noting that -- you know, Hong Kong is

part of China and the likelihood that it kind of gets to a different level in terms of what laws they can pass, it's very difficult to see how all of

that happens.

CHATTERLEY: We've got some lively debate on the show, some back and forth over whether or not China actually wanted to see this law passed in the

first place. It could extradite if it wants to anyways, you said Hong Kong is part of China, even if there is a semi-autonomous legal system in

operation there.

The timing for China, given the tensions with the United States right now is awkward quite frankly.

MEMANI: It's very awkward for sure. Again, I think the impact of all of that on Asian equities, Chinese equities, and EM equities is definitely,

definitely negative. Having said that, I think there's a way to get out of all of this, and I'm sure they will find a way. And at the end of the day,

what would matter for investors far more is whether we can reach a deal with the United States on the trade front or not.

CHATTERLEY: Yes.

MEMANI: At the end of the day, that is really the most important issue facing the global economy. Our hope is that at some point, we will reach

some sort of a settlement, whether that is the G-20 meeting or down the road remains to be seen.

At the moment, though, we know what the impact of the trade tension is, you know, it's roughly let's say three tenths to a half percentage point off of

U.S. GDP, which is not a good thing, but not the end of the world either. It's not catastrophically bad and the U.S. economy is slowing. It just

slows itself some more.

The impetus for the Fed to act in this scenario increases meaningfully, so they will take concrete action and hopefully relatively soon to calm things

down.

CHATTERLEY: You think they'll cut rates?

MEMANI: They will cut rates, whether that isn't -- I don't think it's in June or July, probably later in the year, but they probably won't cut rates

as much as the market may be expecting. So the market is thinking of free rate cuts and I don't think three in 2019 is really on the card.

[09:40:08] MEMANI: By the end of 2020 that may indeed come out, but not in 2019.

CHATTERLEY: If the market doesn't get what it wants though, even in July, fine June perhaps is a little bit early, but if the Fed don't decide to cut

rates in July, are we going to have some kind of a broader tantrum or always communicating that the Fed stands ready and if Jay Powell stands up

there and says, "Look, you know, we've got this under control, and we'll watch very closely," is that going to be enough?

MEMANI: So I think what is going to happen in our view is that data is going to start improving in the second half.

CHATTERLEY: Right.

MEMANI: And in that context, then the power can come out and articulate as to why they are not doing it and the markets will buy it. I think if the

data doesn't recover, and he doesn't do anything, then it's a totally different ball game altogether.

CHATTERLEY: I mean, there's so many potential conflicts and the timing here. We've discussed this week on FIRST MOVE, it's very tricky with the

G-20, and the hopes for the President's meeting there and then the timing of the Fed. What are investors asking you at this moment, and are they

still saying to you, "We want to put money to work here. We want to invest in these markets." And are you still saying, look, we've been telling you

for a while. Our medium term call is we like EM, stick with it.

MEMANI: Yes. So I think investors are very worried for sure. And trade is the top of the list. Having said that, I think if you look at the

market action, they recognize that the underlying strength in the economy is still decent.

CHATTERLEY: Do they or do they just think Jay Powell is going to ride to the rescue?

MEMANI: Well, so I think it's a combination of the two, you know, it's first and foremost that we are not getting into a recessionary environment.

So growth is slowing down for sure, but it's moderating. And in that environment, if you have good policy action from the Fed, that definitely

helps risky assets, equities in particular to go up.

What is most important for emerging markets is China's stimulating its economy, that's coming and the dollar not appreciating. I think if the Fed

cuts, then the dollar stops appreciating, and I think that combination can help the EM in a meaningful way.

CHATTERLEY: What happens if the Chinese yuan depreciates?

MEMANI: Well, so that's a very interesting question. I think that the appreciation of the Chinese yuan is effectively China making the trade

tension a world's problem rather than just a Chinese.

CHATTERLEY: Yes, exporting the problem.

MEMANI: Exporting the problem to the rest of the EM. I think from a political standpoint, it doesn't get them what they need, which is

resolving this issue and resolving this issue relatively quickly.

So I think for now, they're probably not going to depreciate the yuan, but it's a decision that they have to make. If they do that, then again, we

are in a different playing field altogether.

CHATTERLEY: Yes, it's an interesting time, that's for sure. Krishan Memani, fantastic to have you on the show.

MEMANI: Thank you.

CHATTERLEY: The Chief Investment Officer of OFI at Invesco. All right, we're going to take a quick break, but up next, Elon Musk gives Tesla

shares an electric jolt. Can he deliver on his promises though? We'll discuss. Stay with us.

(COMMERCIAL BREAK)

[09:46:18] CHATTERLEY: Welcome back to FIRST MOVE, a decent shot at a record quarter. That was the upbeat forecast from the Tesla CEO who also

made it clear he didn't want to rehash the challenges of the past year. But are Tesla's woes really behind it?

Joining me is a woman who says they very much are, at least for the long term. Tasha Keeney is an analyst at ARK Invest, one of the most bullish

supporters of Tesla out there. The firm has a $6,000.00 five-year target for the stock. That's the best case scenario. Let's be clear on that.

$4,000.00 to $6,000.00. Tasha, great to have you with us.

TASHA KEENEY, ANALYST, ARK INVEST: Good See, Julia.

CHATTERLEY: Okay. Anything in this shareholder meeting that you want to flag or should we move on and talk about other things? Because I always

think there's a short term long term bull-bear disconnect.

KEENEY: Right. Yes, you know, I don't think too much came that too much - - that too much exciting news came out of this meeting. I think investors are happy with it. You know, we've seen the stock up today. Musk talked a

lot about this demand problem. He says there's no demand problem, which is certainly what we see happening, but not too much new, no.

CHATTERLEY: So you've had some pretty fierce pushback from bears of Tesla, and I call it my marmite stock. You either love this, or you or you hate

this stock. You released your model and said, "Guys, if you want to see what our assumptions are, and have a play with the model, you go for it."

Was that good in hindsight or was that a waste of time? Because the critics was still attacking?

KEENEY: You know, at ARK, we try to be as transparent as possible. We publish all of our research online. And, you know, even the sell side, we

released a model that's dynamic. And really no one does that. So we were happy to pioneer that. We got a lot of pushback. You know, there's always

a lot of critics for Tesla. And really, that's actually what we want. Because we want to make sure that our assumptions are correct.

CHATTERLEY: Robust.

KEENEY: We want to battle test them. And we actually got some good feedback on the model. So I think we're -- you know, we would do it again.

CHATTERLEY: I want to go to the demand question here because just to look at your bear case here. Right now for the global EV market, the electric

vehicle market, Tesla has a 17 percent market share. You say okay, you know, worst case will take that right down to six percent market share.

Talk me through some of your assumptions on how you then translate to a share price over the coming years, because I think this is important when

we're worried about demand.

KEENEY: Yes. So I think one of the biggest differentiators with how we see the future going for Tesla, and what the bear see is we think the

electric vehicle market will surprise. So we're estimating that there will be 26 million EV sold globally in 2023.

So in our bear case, we actually take their market share down by two thirds from what it is today, and it's because EVs will just be such a large

market, and this is really because battery cost declines. Batteries are declining in such a way that in the next five years, NICE will become more

expensive than an electric car on a like for like basis. And that's what's going to drive demand.